The U.S. Stock Market’s Body Count

The U.S. Stock Market’s Body Count

 

That diagnosis was right, as far as it went, but this goes beyond Boeing. The ultimate cause of the disaster was the drive to raise profits at any cost—and the cult of the stock price, to which so many venerable companies have conceded.

 

-       How Boeing and the F.A.A. Created The 737 MAX Catastrophe – The New Yorker 

 

 

By J.M. Hamilton (9-20-2020)

 

It’s been a couple of weeks now, remember it quite clearly …  I saw it online.  A washed-up Hollywood celeb, was celebrating Trump’s stock market and how great – and truly American – the stock market was.

 

And I remember thinking, there are some people who actually buy this, that really believe the stock market is the be-all, end-all of the United States.  

 

Despite the fact that the stock market celebrates and rises on: the evisceration of American labor; is anti-union; the offshoring of American labor; loves Communist China supply chains; the Gig Economy; stock market welfare – courtesy of the FED & the US taxpayer; rigged markets – juiced by derivatives & swaps; the formation of labor & market crushing cartels & monopolies; financial engineering, enriching corporate insiders; and the creation & magnification of untold wealth & power, that is, in turn, used to purchase Federal & State governments.  Then there’s the money laundering operation the stock market has become, as the birthright of this and future generations – the US credit line – is transferred into nefarious corporate boardrooms & C-suites, via the Federal Reserve and its policies. 

 

What exactly are we celebrating here, when we praise the stock market?  A knife in the back of American democracy, the elimination of the Main Street economy, the leveraged buyout of government & regulatory bodies (i.e. the eradication of the only check & balance against monopolistic power & fascist, authoritarian, corporate rule)?  

 

And then I remembered, the American stock market has a body count… quite an extraordinary one. Let’s take a look: 

 

Boeing was all over the papers last week.  A US government study came out and it turns out the Boeing boardroom and C-suite – not content to have killed over 300 passengers – was perfectly willing to sacrifice those lives, and more, in return for higher bonuses and stock-options.  At the center of the complete moral collapse of Boeing management, an aircraft that was rushed into production, w/ critical errors and omissions, and a captured regulator, the FAA.  Boeing management is the boomer generation personified, tempted by the get-rich-quick scheme, that is the US stock market. In short, a complete failure, at every, alleged, meritocratic level. 

 

And then there’s Mr. Woodward’s new book, Rage… where Trump admits he played down the pandemic (aka lied to the American people) to avert a “panic.”  Since Trump has gambled nearly his entire presidency on stock market valuations, remarks on it, seemingly, constantly, and he’s advised by numerous Wall Street cronies (sorry, Captains of Finance) … it’s pretty safe to assume the “panic” Trump sought to avoid was in the stock market.  Tens of thousands of Americans died so that the US stock market could maintain its nosebleed valuations and the rich could grow absurdly richer. 

 

Of course, this same collective of Wall Street thieves want their employees sent back to work, in the middle of a pandemic, so that they could preserve their corporate cultures of: systemic racism, homophobia, and misogyny. And this too, blew up, as the plague, predictably, arrived on trading floors. 

 

We learned last week that the Middle Market corporate aid program… Federal Aid under the CARES Act for the Main Street economy … is not trickling out. Seems the banks (already bailed out ad nauseum, with trillions), and/or the Treasury, and/or the FED are hell-bent on destroying the Main Street economy, like it’s 2008 all over again.  What the architects of the failed Wall Street economy seem to have forgotten is that it is Main Street that employs the majority of Americans and keeps the whole house of cards afloat.  Tens of millions of US workers are on – grossly inadequate - unemployment insurance, and tens of thousands of businesses have gone belly up. Meanwhile, Wall Street’s arsonists are setting fire to mom & pop and mid-sized corporations for what?  

 

Answer: The fireside sale, and industry consolidation, that will surely follow for the connected & the powerful?  Another predatory spike in the stock market?  Or perhaps, for banksters, the thought of millions of working families facing eviction, hunger, and possible suicide brightens Wall Street’s and the stock market’s day?  How quintessentially Robber Baron.

 

It’s truly remarkable how Congress & the POTUS delivered trillions in aid & support for Wall Street & the stock market, last March, in record time… while delivering, one time, $1200 checks for American labor. The stock market clearly didn’t have a problem with it and quickly exceeded pre-pandemic highs, from March lows. 

 

Big Oil & Gas is burning up the West Coast, just like the industry burned up Australia last Winter.  And not a peep from members of Congress, as Trump did a California fly by. 

 

Move over Midwest …. Turns out, the West Coast is now,  fly over country. 

 

The Big Oil & Gas fires are: liquidating tens of thousands of homes; making air unbreathable; destroying businesses, jobs and livelihoods; and is creating a public healthcare problem, right as flu season and a second pandemic wave draws near.  But heh, Wall Street, banks, hedge funds, insurance companies still have big bets that the Oil & Gas Industry will make a comeback, post-pandemic.  

 

So shhhhh… best to ignore the apocalyptic orange skies, millions of acres burned, the unbreathable air, and the encroaching cloud of doom hanging over the left coast.  Besides, that’s Pelosi country, and they don’t vote Big Oil, I mean GOP. 

 

We could go on and on.  

 

It’s not even the real economy. The stock market is make-believe, it’s a fiction, rigged on taxpayer money. And further juiced by eliminating the interest on pensions and retiree savings, so that private equity Robber Barons and the stock market can rally further on the FED’s interest rate suppression policies. 

 

And like Mickey D’s… which serves millions annually, the US stock market kills tens of thousands annually.  (We haven’t even touched upon the military industrial complex or the US healthcare system.)

 

I guess that makes the death dealing stock market as American as mom and apple pie.  

 

Humble suggestion… shut it down.  It just might allow the geniuses in government and the boardrooms to focus, if even for a few brief minutes, on the real economy, and lowering their body count.

 

Copyright JM Hamilton Publishing 2020

Shinzo Abe and Global Japanification

Shinzo Abe and Global Japanification

Japan serves as a “Petri dish” for central bankers and their capacity to generate inflation through monetary policy, said Nick Moroutsos, global head of bonds at Janus Henderson.  “We should look at this model and say, ‘maybe we are not able to generate inflation.’”

-       Bond investors cast doubt on Fed’s power to push up inflation – Financial Times

Did Abenomics succeed?

The simple answer is: no.  The central goal of Abenomics was an inflation target of 2 per cent.  Yet even before Covid – 19, Japan never got closer than about 1 per cent.  This is failure.

-       Six Abenomics lessons for a world struggling with ‘Japanification’ – Financial Times

By JM Hamilton (9-6-2020)

Happy Labour Day. 

Aside from the never-ending circus that has come to define American politics, there were two key events that jumped out in the last two weeks.  The first was the announced retirement of Shinzo Abe, the Prime Minister of Japan, who served a record time in office.  The second, within the United States, was the announcement of a “new” Federal Reserve policy designed to keep the pedal to the metal – in regards monetary policy – to achieve a targeted 2% inflation rate.  The link between these two events – seemingly two worlds apart – was Japan’s greatest export ever: Economic Japanification & ultra-accommodative monetary policy. 

Japanification describes an economy characterized by: stagnation, colossal public debt (better identified by an extraordinary debt to GDP ratio), an aging population, deflation, highly accommodative monetary policy (driven by, & simultaneously facilitating, too much private & public sector debt… in the ultimate Catch-22), flat wages over time, and marginal GDP growth. 

Sound familiar?  It should… for the Japanification described above not only applies to its namesake, but many Southern periphery European nations, as well as, the United States and the UK (all to varying degrees).  At the center of the storm, or Japanification, are central banks who attempt to kick start the economy – repeatedly – with the same ultra- accommodative monetary policy (characterized in layman’s terms by money printing, the purchase of government & corporate bonds, as well as, interest rate suppression, et al.). 

The goal of loose monetary or easy money policies (often referred to as “dovish”), deployed by many central banks around the globe, is that a flood of money should spur business loans and entrepreneurship, followed by a robust economy, with a heavy demand for labour.  The resulting robust economy should stimulate GDP growth, competition for labour, and wage growth, as well as, the targeted inflation…  at least in theory.  But for many decades now, in Japan, and since 2008, w/in the United States… instead of a virtuous growth cycle, the many countries deploying Japan’s easy money policies have seen the aforementioned Japanification or stagnation.  (In fairness to the Japanese Prime Minister, Mr. Abe, his country's problems go back to a property and stock market bubble, spanning the mid-eighties to the early nineties.  And the Bank of Japan, or BOJ, had in place dovish monetary policies long before Abe was voted in as PM.)

All of which begs the question, if Japanification and ultra-accommodative monetary policy are proven failures, in terms of its stated objectives, why do global central banks keep utilizing it, again and again?  To answer that question, we need merely follow the forensic golden rule by resolving the riddle: follow the money, and who benefits?   

The beneficiaries of FED policy – which has aped the BOJ’s monetary policy - going back to 2008 crisis and into the present day, are: nearly all the asset classes of the American aristocracy, especially the stock market.  Loose monetary policy, or easy money, fuels M&A, public and commercial debt w/ exceptionally low yields, bank fees, underwriting fees, consolidation, cartel & monopoly, financial engineering and stock buybacks … all of which feeds a great deal of speculation in the stock market, with attendant extreme valuations. Compounding this stock market speculation further is interest rate suppression, as the bond market affords little or no yield.  Zombie companies win.  Politicians also benefit: hard fiscal choices are put off further then they should; endless war is financed by the FED; seemingly endless deficits are funded by the FED; and since the FED, and central banks, often present themselves as economic saviors, the Congress feels free to abdicate its responsibilities to govern.

So to get back to the question at hand, who benefits(?):  The elites at the top of the pyramid, bank majors, and the financialized economy (aka within the US, the Wall Street economy), and of course, politicians.  Who loses?  Well, that would be each country’s respective labour pool, Democracy itself, and the Main Street economy (we can see this firsthand, presently, w/ tens of thousands of failed businesses, tens of millions unemployed, and little or no wage inflation to be found anywhere).  Even pre-pandemic, wages were stagnating throughout the West for decades.  In fact, since consolidation, monopoly, monopsony – instead of entrepreneurship – are among the primary outcomes of the dovish monetary response to Japanification, the globe’s central banks actually end up creating the very deflation and stagnation (doom loop) they say they want to defeat.  

Thereby, proving once again, fiscal & monetary trickledown policies are a failure. 

Perhaps as alarming, the asset bubbles these central banks create provide a convenient distraction from the real economy or Main Street economy, and more importantly: LABOUR’S WOES.  And if elites, the donor class, billionaires, and multinationals are doing well – and the management & stockholders of the latter are doing well – then there’s less of a sense of urgency to make the hard structural choices & decisions necessary to address the malaise & stagnation surrounding Japanification and the easy money policies that further fuel it. 

And here, Mr. Abe is both informative and instructional.  Japan’s Prime Minister knew that highly dovish monetary policy, alone, would not turn around Japan’s economy, but rather, loose monetary policy must be coupled with fiscal action, along with – and this is key – structural reforms. 

Structural reforms with a labour first perspective, that would place more money in labour’s/consumer’s pockets, which would, in turn, spur aggregate demand, consumption, and growth in GDP. 

Here, Mr. Abe hoped that the private sector would increase Japanese labour’s wages.  Relying on the generosity of multinationals to voluntarily raise worker wages, unfortunately, didn’t work out for Japan. 

So what structural reforms would JMH propose, as opposed to multinational charity: a living wage; end the gig-economy; the elimination of America’s failed & nefarious for-profit healthcare system; strengthening America’s labour laws and unions, perhaps with codetermination thrown in (see Germany); the breaking up of America’s seemingly endless number of monopolies & monopsonies… just to name a few remedies.  By doing these things, in whole or in part, America would end up placing more money in the consumer’s and labour’s hands, with the long sought after benefits to the economy.  And of course, barring the above or in concert with the above structural reforms, there’s also fiscal spending, like a Green New Deal or an Economic Bill of Rights. Perfect for the Great Depression we currently, likely, find ourselves in. 

But all of the above structural change, or fiscal proposals, requires an effective and responsive, representative government, and the American political duopoly – at least the current generation of Dems & GOP, presently in power – are too corrupt and simply not up to the challenge. 

Which leads us back to central banks… here, if the central banks want to truly lead, and end Japanification, they have two tools for maximum efficacy: a) public debt forgiveness (extraordinary public debt is used as an excuse by politicians to exact austerity upon the citizenry); and b) helicopter money – or UBI – placed directly into the hands of each and every American, for the span of the crisis or perhaps even in perpetuity. 

Until structural reforms, in combination w/ fiscal spending, are coupled with loose monetary policy, expect the problems of Japanification to continue and compound, especially raging inequality.  In fact, fiscal spending & structural reforms – directed at labour - w/out loose monetary policy (particularly, if debt forgiveness is applied to national debts) … may make for a fairer & more equitable economy throughout the West. 

Copyright JM Hamilton Publishing 2020